Arbitration is a form of alternative dispute resolution, where the parties, natural or legal persons, agree to settle existing dispute out of court by submitting the claim to the third party or parties (arbitrators), chosen by them subject to the agreement. Arbitration awards may be recognized and enforced in more than 140 countries and this number is increasing annually.
Plenty of factors make the parties choose arbitration. For example because arbitral awards are not subject to appeal, they are much more likely to be final than the judgements of courts of first instance. Besides, arbitration proceedings are more flexible as the parties can choose place of arbitration, language used, procedures or rules of law applied, nationality of the arbitrators etc. Thus the parties may structure a neutral procedure offering no undue advantage to any party. Other advantages such as confidentiality, dispute resolution by people who have specialized competence in certain fields, speed of proceedings, clear jurisdiction, simple procedure of recognition and enforcement abroad are those to be counted.
Arbitration proceedings are usual in the international business community and are becoming more acceptable in Lithuania, therefore an initiative to amend the Law on Commercial Arbitration of the Republic of Lithuania, making rules of arbitration proceedings more flexible, is highly positive.
A project of amendment to the Law on Commercial Arbitration of the Republic of Lithuania (hereinafter – the project) has been provided for consideration in the Parliament. The goal of the project is to find harmony with the changes on Model Law on International Commercial Arbitration of United Nations Commission on International Trade Law (UNCITRAL). If the project is enacted, it will assure an advanced development of commercial arbitration in Lithuania.
Firstly, a project provides a new definition of commercial arbitration, which allows solve not only the questions of fact, but also the questions of law by way of arbitration. A project extends the list of disputes which may be submitted to arbitration, eg. it allows to solve disputes for compensation of losses suffered due to the breach of norms of competition law, some disputes arising from labour law and consumption agreements etc.
Secondly, the project does not divide arbitration to national or international, which is advantageous considering the possible differences in legal treatment in different states.
Going on, the project obliges the party to state objection to any non-compliance with arbitration agreement without delay, otherwise it may result in waiver of such right to object. Moreover, the project intends to expand an application of the mentioned duty (to avoid delay) also for the requirements to recognize an arbitration agreement null and void, to abolish or recognize and enforce it.
It is important to mention that the project provides a possibility for the arbitral tribunal to grant interim measures of protection; its decision for application of such measures shall be enforced under the procedure provided for in the Code of civil procedure of the Republic of Lithuania. Arbitral tribunal may claim for provision of a security to indemnify for damages likely to be sustained by the defendant in relation to application of interim measures. Besides, the project entitles an arbitral tribunal to decide on indemnification of damages by award on the merits. The refusal by arbitral tribunal to apply interim measures does not prohibit the parties from applying to the court; a court shall have the same power of issuing interim measures in relation to arbitration proceedings, which is in harmony with the Model Law of UNCITRAL and its travaux preparatoire.
Furthermore, the project grants wider powers to the parties in composition of arbitral tribunal and it solves the question of composition of arbitral tribunal in case of ad hoc arbitration.
What is more, the project provides the right to the arbitral tribunal to rule on its jurisdiction by the partial (preliminary) award which prevents from resolution of the same question in few competitive arbitral tribunals or arbitral tribunal and the court.
Regarding the procedure the parties are granted with wider rights to agree on the rules of procedure to be followed by arbitral tribunal; the parties are free to choose a language to be used in the proceedings; the arbitral tribunal may meet at any place it considers appropriate. The project determines two forms of procedural documents (a plea and a claim) in order to start arbitration proceedings with different requirements what concerns their content. A plea may be provided in order to immediately start arbitration proceedings in case sufficient evidences have not yet been collected and the requirements for the content of it are less severe than in case of a claim; after the receipt of a plea the arbitral tribunal shall determine a term for provision of a claim.
In addition, a new norm granting more freedom to the parties and the arbitral tribunal to determine the order of presentation, acceptance and consideration of evidence has been included into the project. Besides, the arbitral tribunal is granted with the right to order the parties to produce evidence; the principle of substantiation duty is determined.
The parties and the arbitral tribunal are free to choose a form of hearings – either to hold oral, written proceedings or other (eg. e-arbitration). The project determines the forms of awards: final award, partial (preliminary) award, additional award and an order for interim measures. It also defines an impact on arbitration proceedings in case a bankruptcy procedure has been started to one of the parties.
Consequently, the project is a reform of regulation in the sphere of commercial arbitration allowing realization of advanced amendments of UNCITRAL Model Law, made in 2006 and, if enacted, would encourage the parties to use arbitration more frequently. Reducing workload in courts would result in bigger efficiency and public confidence, to say nothing about saving of state finance.
Assistant to the Attorney at Law
ECOVIS Miškinis, Kvainauskas ir partneriai advokatų kontora